India Taps US for LPG Imports as Middle East Disruptions Persist

India is witnessing a historic shift in its energy sourcing strategy, with liquefied petroleum gas (LPG) imports from the United States projected to surpass 1 million metric tonnes in June. This surge comes as geopolitical tensions in the Middle East and disruptions in the Strait of Hormuz force New Delhi to seek more expensive, reliable alternatives to ensure domestic cooking gas security.

A Strategic Pivot from the Middle East

For years, India maintained a heavy reliance on Middle Eastern producers, who historically accounted for approximately 90% of the country's LPG imports. With monthly imports averaging around 2 million tonnes, any instability in the Strait of Hormuz poses a significant risk to India's energy security. Following the US-Israel-Iran conflict escalations, LPG imports saw a sharp dip to 696,000 tonnes in April.

To stabilize the supply chain, Indian refiners have aggressively moved toward the US market. While India had previously aimed to increase US LPG purchases to roughly 10% of its total imports to rebalance trade ties with Washington, the current regional uncertainty has accelerated this transition. In May, imports from the US reached 648,300 tonnes, a massive jump compared to just 134,700 tonnes from the UAE during the same period.

Managing Costs and Ensuring Household Supply

The shift toward US-sourced LPG is not without its financial challenges. Trade sources indicate that Indian refiners have been buying unprecedented volumes from the US despite facing higher spot market premiums. The government's primary directive has been to prioritize uninterrupted cooking gas supplies to households over cost optimization.

To mitigate the impact of higher import costs and supply volatility, the Indian government has implemented a multi-pronged approach:

• Increased Domestic Production: Refiners have been asked to maximize domestic LPG production.
• Sales Prioritization: Household LPG sales have been given top priority in the distribution chain.
• Infrastructure Expansion: The government is accelerating the expansion of piped natural gas (PNG) connections, a move expected to reduce LPG consumption by 15% to 20%.

The Evolving Import Landscape for June

As of June, the import profile shows a significant diversification. Preliminary data suggests India is scheduled to import approximately 1.07 million tonnes of LPG from the United States. Other key contributors for the month include 223,800 tonnes from the UAE, 116,200 tonnes from Iran, and 108,600 tonnes from Kuwait.

While the US remains the primary alternative, traditional suppliers are beginning to show signs of recovery. The UAE is expected to supply between 300,000 and 400,000 tonnes in June, often offering cargoes at premiums of approximately $100 per tonne above Saudi Contract Prices. As the Strait of Hormuz partially reopens, a gradual return of Middle Eastern supplies may eventually help ease prices and reduce the reliance on high-cost US spot purchases.

Key Takeaways

• Record US Imports: India's LPG imports from the US are set to exceed 1 million tonnes in June, marking a major shift in sourcing patterns.
• Geopolitical Drivers: Disruptions in the Middle East and the Strait of Hormuz have forced India to pivot from its traditional 90% reliance on Middle Eastern suppliers.
• Mitigation Strategies: To manage supply risks, India is prioritizing household sales, boosting domestic production, and expanding piped natural gas networks to reduce LPG demand by up to 20%.